Video report by ITV News Senior International Correspondent John Irvine
President Donald Trump has signed an executive order targeting Iran’s supreme leader Ayatollah Ali Khamenei and his associates with financial sanctions.
Mr Trump said the supreme leader is responsible for Iran’s hostile conduct.
He said the United States does not seek conflict with Iran but will continue to increase pressure on its Middle East adversary to prevent it from developing nuclear weapons and supporting militant groups.
After signing the sanctions Mr Trump said "the assets of Ayatollah Ali Khamenei and his office will not be spared from the sanctions".
He added: "These measures represent a strong and proportionate response to Iran's increasingly provocative actions.
"We will continue to increase pressure on Tehran until the regime abandons its dangerous activities and aspirations including the pursuit of nuclear weapons."
It comes as US secretary of state Mike Pompeo visits Saudi Arabia in a hastily arranged visit amid mounting tensions between Washington and Tehran.
Mr Pompeo wrote on Twitter Monday that he had met with Saudi King Salman in the city of Jiddah to discuss the heightened tensions and protecting maritime security in the Persian Gulf.
Mr Pompeo, considered a hard-liner in Washington, referred to Iran as “the world’s largest state sponsor of terror” before he embarked the Middle East trip.
He is also expected to meet Abu Dhabi's powerful Crown Prince Mohamed bin Zayed, before heading to India Tuesday.
He said he would be speaking with leaders in Saudi Arabia and the United Arab Emirates “about how to make sure that we are all strategically aligned, and how we can build out a global coalition … not only throughout the Gulf states, but in Asia and in Europe” that is prepared to push back against Iran.
ITV News Washington Correspondent Robert Moore said the new US sanctions against Iran are "much more personal", but they do not appear to be having the desired effect
The United Arab Emirates, a close US ally, is a member of the Saudi-led coalition at war against Iranian-allied rebels in Yemen.
Still, the tiny Gulf kingdom is wary of direct conflict with Iran, and has expressed strong support for diplomacy in the growing crisis.
The downing of the surveillance drone, valued at more than 100 million US dollars, saw the United States pull back from the brink of a military strike on Iran after Trump last week called off strikes in retaliation.
Iran’s naval commander, Rear Admiral Hossein Khanzadi, threatened Washington, saying that Tehran is capable of shooting down other American spy drones that violate Iranian airspace.
“We confidently say that the crushing response can always be repeated, and the enemy knows it,” Mr Khanzadi was quoted as saying by the semi-official Tasnim news agency during a meeting with a group of defence officials.
The United States pulled out of a 2015 nuclear deal that world powers signed with Iran and has already applied crushing sanctions on the country’s economy.
Iran accuses the US of raising tensions with the aim of crippling Iran's economy and forcing policy changes.